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Wednesday, November 30, 2016

Elliott Wave Update 30 November 2016


Tuesday, November 29, 2016

Elliott Wave Update 29 Novemeber 2016

Once scenario has the market just crapping around the highs in some kind of ending diagonal triangle for another many weeks and/or months. This would make time relationships between waves look good and on top of that, a Fibonacci 8 year up cycle would be ideal.
Another possible count is that the high has occurred. Significant tops have usually been long-winded affairs so patience is again required.


Monday, November 28, 2016

Elliott Wave Update 28 November 2016

Solid close under the narrow up channel.  There are enough waves in place to call it a complete pattern. But we shall see.


Friday, November 25, 2016

Wednesday, November 23, 2016

Elliott Wave Update 23 November 2016

Not much to add to the things we have been saying for the last many weeks.
Gold has reached our major support target. Sentiment is very negative on its outlook.



Tuesday, November 22, 2016

Elliott Wave Update 22 November 2016

The chart below suggests the maximum wave 5 of (5) of [5] can go is 23,780. However the shorter wave counts do not align with this higher number. If the market does go that high, then the squiggle counts (last 2 charts) are incorrect.
However shorter wave charts suggests the "right look" is occurring right about now. The next 2 charts show how Minor 5 may be a quick burst with a (v) of [v] of 5 as an extended fifth wave.  Since wave [iii] is not much longer than wave [I], we can expect wave [v] to be the extended wave of the structure. This is how you would properly count that situation:

Monday, November 21, 2016

Elliott Wave Update 21 November 2016

Bonds, The Euro and Dollar, Gold and Silver are all reaching extreme sentiment readings and are due for a turn in price in each. That means bond prices up, euro up, dollar down, gold and silver up in price. Stocks are not however yet at an extreme in sentiment. So we could get a turn in the other asset classes yet stocks drift higher through the holiday season.

The chart below suggests the time relationship has more room to run:
The next weekly chart shows a price relationship between waves. Again, there is more room to run. But remember in wave (5), wave 1 is the longest wave, so therefore wave 5 cannot be longer than 3.  If 5 goes higher than 3, then the count is not correct for (5).

My Fib markers show the approximate maximum amount of wave 5 price and still be within EW rules.
The squiggle count, wave[iii] is longer than [i], therefore [v] of 5 can run as long as it requires but not to violate the higher degree wave count as explained above.

Squiggle count is that wave [v] of 5 is extending which makes sense because wave [iii] was not much longer than [i]. Therefore that suggest wave [v] will be the longest wave within wave 5 of (5).
Gold nearing solid support.
Dollar.  Target shown.
Bind chart looks eerily similar to the dollar chart.


Thursday, November 17, 2016

Elliott Wave Update 17 November 2016

We have reached a minimum wave level in both the squiggle count and longer term counts. However per yesterday's discussion , we'll see if the market needs way more time which is where I am leaning.  The top alt count is that merely wave [i] of 5 of (5) is peaking and we have much more time to slog through (perhaps until the Presidential inauguration or after).

But the sentiment discussion yesterday in other markets gives us pause.  We'll just keep making squiggles and wait for something definitive.

The bottom line is that the primary count has us forming a major all-time high and it will likely need time to work itself out.
New all-time high in the Wilshire as predicted.


Wednesday, November 16, 2016

Elliott Wave Update 16 November 2016

Note the top alt count, wave [i] of 5 of (5). That implies decline then new stock market high in wave [iii] of 5 of (5).
According to Elliott Wave International (click on my links to the left to become a FREE Club Elliott Wave International member) negative sentiment is reaching extremes in a few asset classes which portends a relief rally for each eventually. Again, according to EWI via Trade-Futures Daily Sentiment Index (DSI), the Euro is at 7% bullish. The last 5 days of bond bulls has been below sub 10% (with 2 days at 4% each). Gold is sitting around 6% bullish and silver is around 12% bullish.  These extremes only suggest a relief rally in each asset class is coming near, not at what price. Wave pattern can help predict when the relief will arrive.

The stock market is not yet above 50% bulls in the DSI. One would expect that a major all-time top would occur at an even higher DSI level although the sentiment extremes can often diverge majorly from a wave three peak in a pattern because wave threes are almost always the strongest waves thus garnering the strongest DSI extreme readings. So perhaps the stock market will hit its peak in DSI and price and sentiment in all classes will hit extremes (with stocks being a bullish extreme of perhaps 70-80% DSI) at nearly the same time.

This situation would in theory lead to major reversals in stocks (down), bonds (prices up, yields down), Gold, silver (prices up) and dollar (down), Euro (up). These things usually do not all turn at the same time but you get the picture that perhaps we are reaching an inflection point.

The main concern of this blog is of course stocks since that best reflects overall social mood patterns better than any other we mentioned.  Keep an eye that perhaps that only wave [i] of 5 of [5] is peaking and that the market has many more gyrations and weeks of wave undulations to go through.
Couple of more squiggles for bonds?
Same applies for dollar. Couple of more squiggles up for now?
Gold is due for a rally. Again, a couple of more squiggles lower, then rally?  Major support is coming into play.






Tuesday, November 15, 2016

Elliott Wave Update ~ 15 November 2016

We nearly have a minimum wave count fulfillment of our primary wave count of the Wilshire 5000.
The problem is, not much time has passed for wave 5 of (5) of [5] compared to its sister waves 1, 2, 3 and 4 of (5).
Yet here is the possible squiggle count. Note that wave [iii] is longer than wave [i] and therefore cannot be the shortest wave in a five wave structure (as required by EW rule). Wave [v] therefore has an opportunity to run up in both price and time if it so requires.
Wilshire nearly making a new all-time high today. Do note however that wave 1 is the longest of (5). Therefore 5 of (5) cannot run higher than 3 of (5) by rule or else this count is false. How does this larger degree count intersect with the 5-minute chart above? Wave [v] of 5 in the 5-minute count can run up in price as much as it wants - to a point - it cannot violate the daily chart below. Wave 5 cannot be longer than wave 3 in the chart below. Therefore there is a "range" for price that both charts need to hit to maintain EW rules for both the higher degree count and subwave count.

Kinda neat huh?
Fibonacci 8 years is early March 2017 from the March 2009 low. That would make for a nice symmetry time-wise. However form takes precedence and as shown in the chart above, there is a valid 5 wave count since the November 4th low. However tops usually are more drawn-out affairs so take it with a grain of salt.
GDOW:
Another valid count in place.


Monday, November 14, 2016

Bond Yields, Gold, The Dollar and Deflation

(links to previous update post charts from tonight)

NOTE: Negative sentiment is reaching short term extremes in Bonds, Gold and (not quite yet) dollar which is why I felt I needed to talk about the longer term prospects of each. Bonds and Gold are reaching negative sentiment - according to Elliott Wave International - which suggests an eventual relief rally for prices in each.  You'll see the links to my charts will suggest those eventual relief rally in bonds and gold.

BOND YIELDS

All the talk seems to be that rising rates will spark inflation as if this was the 1970's/early '80's all over again. They are likely very wrong. My thesis has always been that once rates start to rise again, it will spark the opposite: a massive deflationary spiral. The world is awash in debt unlike any other time in human history. The interest payments will be unbearable in a rising rate scenario.  This will cause massive defaults at the Federal, corporate, municipal and individual level.  Defaults = deflation.

Lets review what is actually money. Simply put, Cash + Credit = Money. Credit dwarfs cash in this fractional reserve lending world. As an example, if the world has $100 Trillion in debt (this is actually too low, just using round numbers here ) and bankruptcies, etc causes a 20% default, you now have a $20 Trillion loss at all levels; corporate, government, and individual. This theoretical loss will be real in that jobs will be lost, income will be lost, and thus more default and bankruptcies as a result. Once the cash flow is cut off its "game over". 

Loss of cash flow is what locked up the financial system in 2008. However the Fed followed the market and nailed interest rates to the floor which allowed the party (lending) to go on.  Yet at no level did anyone take advantage of low rates and get themselves out of debt. The opposite occurred! Corporations took loans and then bought back their stocks to enrich the CEO's and board members. Governments kept piling up debt. Individuals took advantage of low credit card rates and also piled up debt to include student and car loans. The situation is much worse 8 years later in the debt department.  Banks, though the American ones are better capitalized now than 2008, the European ones are not. But it won't matter for the American ones in the long run either because what's the difference really between 6% capitalization and 9% capitalization??  Nothing really when you think about the gargantuan levels of debt in the system!

Once rates rise in a negative trending social mood, who will be willing to give a loan to a corporate entity that should never be getting said loan? Who will lend municipalities money to cover their previous debt?

But some people say the Fed "controls" interest rates. Is that really so? No it is not. The Fed is subject to social mood just like everyone else.  When the market demands a higher rate, the Fed has no choice but to raise short term rates.  And the market seems to be in control.

If a deflationary spiral begins, it will feed on itself until it reaches its natural end. It will be a purge of all the previous 35 years of malinvestment and excess greed that has distorted the system for so long.

GOLD

Gold's peak in a glorious 5 wave long term pattern signaled a corrective downwards must occur which is what has happened so far. My projection for Gold in the deflationary collapse is at least $475, or the "virgin wave space" of the total Gold pattern. But you say impossible! Well no, actually paper gold is leveraged by some estimates of 120:1 (Zero Hedge).  You are trading paper promises not gold!  Kind of like bonds. Its a promise that cannot be ultimately kept. So why would people pay high prices for something they can never actually get? Do you think they will ever deliver on your "claim"?
But what of the - I'll call it black market gold for now - or "physical" gold prices? I suspect that physical gold will always hold a "premium" over paper gold, but I suspect the paper gold market will drag down prices for physical. Why wouldn't it? If we get into a deflationary spiral, Gold will not escape deflation's clutches. 

I'm a big fan of Gold. Holding physical is definitely a good thing if all hell breaks loose. It has a track record since the beginning of social organization throughout time.  However, governments have been known to 'ban' holding physical gold which is what I suspect will happen eventually in a deflationary collapse. So what would be a good price to buy physical? That is on you, I am merely speculating that paper Gold projects to eventually $475/oz.

DOLLAR

King Dollar. "The Dollar Will Collapse" is a common thing heard over the last 8 years. Not so much in the short term because sentiment is high due to its medium term consolidation and recent rise. But in the long run people are convinced the dollar is doomed. I say wrong. A deflationary collapse will spark a demand for dollars. Bankruptcies are mostly settled in the distribution of dollars. Social mood fear sparks a bank run which pulls out physical cash - dollars! 

Why would dollars be worthless before bonds? Bonds back dollars not the other way around.  It always makes sense to me that bonds would become worthless first before dollars. After all, your neighborhood grocery store may demand dollars in a deflationary collapse and ban credit cards. Would you be using bonds to buy food? I doubt it! If the government banned cash, the value of having physical cash would likely skyrocket. People are not quick to change monetary systems or their way of thinking about them at least not right away.

So ultimately my projection for the dollar is a continuous long term rise which will crush a lot of things economically particularly corporations who rely on a cheaper dollar for profit.

CONCLUSION

It didn't matter if Trump or Clinton had won. The market has been due for a major all-time peak for quite a while and its then due for a major all-time reversal as a result.  Too bad Trump will likely get blamed. Social mood will likely continue to deteriorate. Has it not been that way? Were there riots post election 2000, 2004, 2008, 2012?  No.  But we are seeing signs that the long term trend is starting to really take hold. The stock market is fractured. A historic top seems near enough.  Trade accordingly.



Elliott Wave Update 14 November 2016

Triangulating in the S&P 500 (you can make a bullish triangle or a bearish) so which way will it break?
Gold has significant support at the $1200 level + or - $20.
Bonds. Ending wedge pattern suggested a sharp move to the upside.
6 month yield count. Following through in a thrust upwards.
3 month yield is leading and portends a rate hike by the Fed.  Rate hikes will crush those who are in major debt that relies on the short term rate (such as credit cards). Its going to crush most of America.



Friday, November 11, 2016

Elliott Wave Update 11 November 2016

One possible count. However,  wave 5 of (5) would be very short in time compared to waves 1 and 3.

Thursday, November 10, 2016

Elliott Wave Update 10 November 2016

The only requirement for the primary count is that the Wilshire 5000 make a new all-time high. The DJIA has already done so. The chart below gives you an idea of the timeline relationships between waves. I would expect wave 5 to be the shortest time-wise.  We need to have some more patience.
This DJIA wedge pattern is curious.
3 month yields exploding out of the consolidation pattern suggesting of a rate hike next FED meeting.  Remember, the Fed follows the market not vice versa.
6 month count.  A higher high also out of a consolidation pattern.
NYA lagging and GDOW.
Dollar also heading up out of another consolidation pattern:
CPCE:
Gold's correction [B] wave likely needs more time and price before it is over. Hence the projected count.